Safe and Sound

Bank of Franklin

Meadville, MS

4

Star Rating

Bank of Franklin is an FDIC-insured bank founded in 1912 and currently headquartered in Meadville, MS. The bank holds equity of $14.5 million on assets of $132.6 million, according to December 31, 2017, regulatory filings.

U.S. bank customers have $116.1 million on deposit at 5 offices in MS run by 50 full-time employees. With that footprint, the bank holds loans and leases worth $86.6 million, $70.9 million of which are for real estate.

Overall, Bankrate believes that, as of December 31, 2017, Bank of Franklin exhibited a good condition, earning 4 out of 5 stars for safety and soundness. Here's a breakdown of how the bank fared on the three major criteria Bankrate used to grade American banks.

THE INSTITUTION'S SCORE

Capital Score

Capital acts as a buffer against losses and affords protection for account holders during periods of financial trouble for the bank. It follows then that when it comes to measuring an a bank's financial fortitude, capital is valuable. When it comes to safety and soundness, more capital is preferred.

Bank of Franklin received a score of 12 out of a possible 30 points on our test to measure the adequacy of a bank's capital, falling short of the national average of 13.13.

One way to measure this buffer is looking at a bank's Tier 1 capital ratio. Bank of Franklin's Tier 1 capital ratio was 14.35 percent, higher than the 6 percent level regulators consider adequate, but below the national average of 25.65 percent. A higher capital ratio means the bank will be better able to weather financial downturns.

Overall, Bank of Franklin held equity amounting to 10.93 percent of its assets, which was lower than the national average of 12.03 percent.

Asset Quality Score

This test's purpose is to estimate how the bank's reserves set aside to cover loan losses, as well as overall capitalization, could be affected by problem assets, such as past-due loans.

A bank with extensive holdings of these types of assets may eventually have to use capital to cover losses, shrinking its equity cushion. Many of those assets are also likely to be in non-accrual status and no longer earning money, resulting in depressed earnings and potentially more risk of a failure in the future.

Bank of Franklin fell short of the national average of 37.49 on Bankrate's asset quality test, racking up 32 out of a possible 40 points .

The percentage of problem assets a bank holds compared to its total assets is a handy indicator of asset quality.As of December 31, 2017, 0.46 percent of Bank of Franklin's loans were noncurrent, meaning they were more than 90 days past due or were in non-accrual status. That's below the national average of 1.01 percent.

Banks maintain a reserve known as an "allowance for loan and lease losses" to deal with troubled assets . That reserve's size can be a helpful indicator when evaluating a bank's ability to manage problem assets, especially when compared to the total amount of at-risk loans. Unfortunately, the FDIC did not provide information on Bank of Franklin's loan loss allowance in its most recent filings.

Earnings score

How profitable a bank is affects its long-term survivability. A bank can retain its earnings, giving a boost to its capital cushion, or put them to work addressing problematic loans, potentially making the bank better prepared to withstand financial shocks. However, banks that are losing money are less able to do those things.

Bank of Franklin scored 14 out of a possible 30 on Bankrate's test of earnings, falling short of the national average of 15.12.

One widely used way to measure a bank's earnings is return on equity, calculated by dividing net income (profit, basically) by total equity. Bank of Franklin's most recent annualized quarterly return on equity was 6.96 percent, below the national average of 8.10 percent.

The bank earned net income of $976,000 on total equity of $14.5 million for the twelve months ended December 31, 2017. The bank reported an annualized return on average assets, or ROA, of 0.72 percent, below the 1 percent deemed satisfactory in accordance with industry standards and below the average for U.S. banks of 1.00 percent.

Bankrate.com's Safe & Sound Ratings provide a star rating system to evaluate the current financial status of financial institutions. The information gathered about banks, credit unions and thrifts is updated as set forth in the Terms of Use of Safe & Sound Ratings and Reports. The Safe & Sound Ratings information is grouped by categories of banks, thrifts and credit unions.

Scoring methodology

Bankrate.com evaluates the financial condition of institutions and assigns a one- to five-star rating for each with five stars representing the highest rating. Institutions with satisfactory performance will generally receive a rating of three or more stars. The majority of institutions fall into the three- to four-star range. An institution with an "NR" rating may be too new to rate or may have limited the publicly available information in their regulatory filings. The "NR" is not an indication of financial strength or weakness. The Safe & Sound rating is believed to be reliable, but the information is not guaranteed. In addition, events since the information was collected may have altered the institution's financial condition.

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